We need an Economics curriculum

The Washington Post stunningly announces on Page One this morning that they don’t understand economics under the headline “Fed’s Rate Cuts Bring No Relief For Consumers’ Credit Card Bills”;

The Federal Reserve’s dramatic rate cuts were expected to make it cheaper for consumers to use credit cards. But credit card interest rates remain high and in many cases have even climbed.

Well, credit cards aren’t a reflection of lending rates – it’s a retail business. Credit card users are welcome to shop their credit card business and dump high interest credit cards for lower rates.

The increases have perplexed customers such as Richard Davis, an insurance agent who lives in Fairfax County who said the annual percentage rate on his Chase Business Visa card went from 8 percent to 24 percent in December, three months after the Fed’s first rate cut. “That just floored me,” he said.

If I were Richard Davis, an insurance agent, no less, and I made a stupid remark like that in public, I should expect my clients to bail out of the financial services I’ve provided them. Credit rates increase when people don’t make their payments, the whole lending crisis happened because people stopped making payments on their credit. So guess what – that impacts the whole lending market, not just mortgage companies. Well, at least the Washington Post went into that after their terrorizing headline;

Banks have reported steep write-offs related to the mortgage mess, and their stock prices have plummeted. “Credit cards historically have been a very profitable segment for the banking industry, so what they’re doing is trying to squeeze customers as much as they can, particularly for accounts they don’t see as profitable or as high risk,” said Curtis Arnold, founder of CardRatings.com, an independent consumer resource on credit cards.

But it’s not the lenders’ fault, as the Washington Post implies; it’s the whole credit market. What the Washington Post doesn’t recognize is that borrowers are free to shop their good credit around for a better rate.

And of course, it’s not really a crisis until the Democrats tell us it is;

On Thursday, Rep. Carolyn B. Maloney (D-N.Y.), chairman of the House financial institutions and consumer credit subcommittee, introduced the Credit Cardholders’ Bill of Rights Act of 2008, which would, among other things, restrict fees and rate changes that companies could impose.

Sen. Carl M. Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, has proposed a similar bill. He said in an interview that Congress will keep an eye on how card issuers react to the changes in the federal funds rate, which the Fed controls. “The credit cards raise the rates when they go up. They should go down when interest rates go down,” he said.

We don’t need Congressional intervention, we need an education system that explains simple economics to students so they don’t get their pointy little heads into something from which they can’t recover.

Category: Economy, Media, Politics